GBP/USD Ichimoku Kinko Hyo Analysis – March 25, 2014

GBP/USD Ichimoku Kinko Hyo Analysis

On its 4-hour time frame, GBP/USD is showing signs of starting a new trend based on the Ichimoku Kinko Hyo indicator. The pair appears to be finding support at the 1.6500 major psychological level at the moment, as traders await the release of the UK CPI (consumer price index), which is slated to show a weaker 1.7% reading compared the previous 1.9% figure. If so, it would mark the second consecutive month that annual inflation has fallen below the BOE (Bank of England) target of 2%.GBP/USD Ichimoku Kinko Hyo Analysis

The red line is already indicating that a market trend is underway and that this selloff might carry on below the 1.6500 mark, which would be likely if the CPI figure falls short of expectations. The green line has crossed below the price a few days back, an early sell signal for those looking to short GBP/USD.


GBP/USD Technical Outlook

Bear in mind that the US dollar has been supported by the Fed’s recent decision to carry on with its taper of $10 billion in asset purchases per month. In addition to that, Fed Chairwoman Yellen has hinted that a rate hike could happen around six months after the asset purchases are ended.

However, should the UK CPI come in strong and beat expectations, GBP/USD might pull back to the resistance levels marked by the orange lines. These are located at 1.6619 and 1.6687, which could be good stop loss levels for those already short on the pair. More conservative entries to short could be placed on this levels, depending on how the UK CPI turns out.

An upward crossover of the green line on the price could indicate that the selloff was merely a large market correction and that the longer-term uptrend might resume. For now though, with price trading below the blue line, the GBP/USD downtrend might still carry on.

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.